Categories AlphaGraphs, Analysis, Consumer

Under Armour (UAA) remains cautiously confident of its ‘battle tested’ biz model

The management raised its FY21outlook but warned that the business might be impacted by the continuing COVID-related uncertainty

Like most apparel and lifestyle companies, Under Armour, Inc. (NYSE: UAA) experienced a slowdown in the early phase of the pandemic, with supply chain bottlenecks and production disruption weighing on operations. However, the sports apparel firm regained the lost momentum in recent months, supported by its aggressive marketing efforts and the ongoing market reopening.

Stock Gains

The company’s class-A stock has gained 35% so far in 2021, extending the uptrend that started early last year. The stock got a major boost in the first week of November after the company reported better-than-expected sales and earnings numbers for the third quarter of 2021. After reaching a five-year high, UAA made a modest pullback that can be considered as an ideal entry point from an investment perspective.

Read management/analysts’ comments on Under Armour’s Q3 results

Market watchers recommend buying the stock, almost unanimously, citing its impressive growth prospects. It is estimated that the stock would gain a whopping 42% in the 12-month period, from the last closing price. The management’s bullish outlook – full-year 2021 guidance for annual sales growth was raised to 25% — underscores the positive sentiment.

Under Armour Q3 2021 earnings infographic

Demand Rebounds

Of late, there has been a marked uptick in the demand for sports sneakers and athletic wear. That, combined with Under Armour’s increased focus on team games and its high marketing spending, is having a positive effect on top-line performance. Also, the direct-to-customer business expanded steadily over the past several months, reflecting the pandemic-driven shift in customers’ shopping behavior.

As part of our holistic journey to compete strategy, which centers on goal setting, training, and what it takes to earn results, we use the team sports lens to focus on the importance of mental strength as an unlock to realize one’s full potential. Through uniquely Under Armour execution by our social media, TV, retail and digital activations, The Only Way is Through and Train Your Mind, Train Your Game showed up as one global brand and voice across categories, channels, and our marketing funnel.

Patrik Frisk, chief executive officer of Under Armour

Bullish Outlook

In the third quarter of 2021, adjusted profit increased to $0.31 per share and beat estimates by a wide margin. Net income was $113.4 million or $0.24 per share, compared to $38.9 million or $0.09 per share in the third quarter of 2020. The earnings growth was driven by an 8% rise in net revenues to $1.55 billion, which is above the consensus forecast.  There was a 12% growth in direct-to-customer sales.

While raising the full-year guidance and assuring near-term value creation for shareholders, Under Armour executives warned that future performance might be impacted by the continuing uncertainty related to COVID-19.

Key quarterly highlights from Nike’s Q1 financial results

Shares of Under Armour traded higher in the early hours of Monday, after closing the previous session lower. They have gained about 5% in the past six months, driving up the company’s market capitalization to around $10 billion.

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